Disclaimer: We are not tax professionals!
As you may already know, you can deduct the mileage you rack up on your vehicle for rideshare using the standard mileage deduction rate of 58 cents a mile. So if you drive 10,000 miles, your tax deduction will be $5,800 for tax year 2019 which is a 58 cents per mile deduction (this amount changes every year).
Here are some other deductions (from Turbo Tax) you may of not of known about:
- Bottled water, snacks and amenities for customers
- Business taxes and licenses
- City and airport fees
- Freeway, highway, and bridge tolls
- Electronic toll transponder
- Floor mats
- Car tool kit
- First aid kit
- Tire inflator and pressure gauge
- Portable battery jump pack
- Flashlights and flares
- Roadside assistance plans
- Office supplies
Doing taxes as a rideshare driver/independent contractor can be daunting, but I have found software like Turbo Tax (who has actually partnered with Uber and Lyft before, so check your Uber and Lyft rewards center for free/discounted access) to be the best way. Sure you can pay someone to do it for you as they claim you can get the biggest but not everyone truly understands what rideshare exactly entails. Furthermore, “Tax Professionals” are not liable when the IRS comes after you (should they get you to claim what you are not supposed to claim.) It is actually on the individual tax payer. Turbo Tax is technically not liable either, but at least you have a template to go by, again, they partnered with Uber and Lyft, so they fully understand Rideshare.
Something to think about: The IRS standard mileage rate (58 cents) deductible takes into account fuel, maintenance and vehicle deprecation, (the biggest factor), basically what it costs to drive a car. Here in Houston, Uber and Lyft pay drivers 60 cents a mile. The IRS is not known to give away free money, so it is very likely it is costing you close to that 58 cents a mile to run that vehicle. Essentially you are making 2 cents a mile.
So how do you counter that and become more profitable? Buy a cheap cash car. In Houston, Uber allows vehicles as old as 15 years old. (Lyft requires a 2015 or newer, and they do not have nearly as many customers as Uber)
Cutting out the vehicle deprecation is the quickest way to making Uber work for you. A $2,000 cash car can last for a couple of years with simple maintenance and you still get to use the full mileage deduction rate.
The good thing is, you should walk away without paying taxes at the end of the year. The bad thing is, your income tax return is goign to show you made so little money, it is going to be hard to qualify for something like a mortgage without a standard job. While it can be tempting to pad on some extra miles, to get a bigger refund (especially when you can play with numbers on Turbo Tax) the IRS can audit you at any time. With all of the negative press (and even some pushback from congress, who have hard complaints about Uber and Lyft paying less and less) it is very possible that rideshare drivers will be audited more. After all, some of the biggest criminals in history, have gone down for tax evasion. SO BE TRUTHFUL!